General Background: The 1970s were a disastrous time for the city of New York. The city experienced its greatest loss of population, from its 1970 peak of 7,896,000 to 7,092,000, a loss equal to the population of San Francisco. The city itself came close to virtual bankruptcy. The area of the city most distressed during this period was the south Bronx, located just to the north of Manhattan Island (Manhattan houses the city's business core, second largest in the world after central Tokyo).

The South Bronx: By 1975, the South Bronx was the most devastated urban landscape in the United States. The three community districts that comprise the core of the South Bronx had fallen 57 percent in population from 383,000 in 1970 to 166,000 in 1980, which has to rival the greatest short term population loss in any urban setting with the possible exception of war's devastation.

Government Failure: In a number of ways, the fall of the South Bronx represents a combination of govermment failures.

By the late 1960s, the courts were beginning to require mandatory busing of school children for racial balance. The prospect of having their children attend schools outside their neighborhoods led many households to seek the security of suburban areas that would be exempt from such orders. This increased vacancy rates.

The city's decades old policy of rent control left building owners virtually no incentive to upgrade or even maintain their properties. As housing became less desirable, vacancies rose.

In what former Bronx borough president and Congressman Herman Badillo called "the worst mistake of all," local and state authorities built Co-op City, the nation's largest multi-family housing development in the extreme northeast corner of the Bronx. Co-op City is comprised of approximately 35 high rise (24 to 33 story) buildings with 15,000 units. At a time when households were concerned about security, Co-op City provided a much safer environment. The attraction of Co-op City further added to the apartment vacancy crisis.

For years, the city had been increasing both business and personal taxes. Among other things, this led to a substantial reduction in manufacturing in the South Bronx.

In the late 1960s, the city adopted a policy of concentrating welfare households in the South Bronx, where vacancies had become the highest in the city.

Lump sum payments of from $1,000 to $3,500 ($4,500 to $15,500 in 2000$) were available from the city for relocation to low income residents. This provided some residents an incentive to burn their own buildings. In 1970, the national per capita income was $3,900.

Further, apartment owners, facing financial ruin, arranged for their buildings to be burned (arson) so that they could recover some of their investment through insurance. As Robert Worthnotes:

… the Bronx began to burn in about 1970. Some of the fires were accidents, the inevitable result of decaying electrical systems. Many were set by landlords who would then collect the insurance money. Often they would sell the building--whether it was still inhabited or not--to "finishers" who would strip out the electrical wiring, plumbing fixtures, and anything else that could be sold for a profit before torching it. "Sometimes there'd be a note delivered telling you the place would burn that night," one man who lived through the period told me. "Sometimes not." People got used to sleeping with their shoes on, so that they could escape if the building began to burn.

There is also the usual temptation to blame Robert Moses and his expressway building, which cut swaths across the community. While there is no doubt that elevated and depressed expressways do not improve a neighborhood, they do not, however, necessarily inflict distress of the nature experienced in the South Bronx. For example, Moses' expressways also cut swaths through other New York City neighborhoods, without inflicting South Bronx style devastation. Virtually every major city in the United States has experienced the same dynamic. In marginal neighborhoods, expressways can add to an already distressed situation. But, urban expressways did not destroy the north side of Chicago, the south side of Los Angeles, or Seattle's north side, etc. For every mile of urban neighborhood perceived as destroyed by expressways, there are many miles of neighborhood that escaped such a fate. This is not to suggest that urban areas ought to be cut apart by expressways, it is simply to note that the conventional wisdom proceeds from an incomplete understanding of the dynamic.

Virtual War on the City: At the same time, during the late 1960s, many American cities experienced civil disorders, which included rioting and arson. Further, the nation was experiencing an explosion in the crime rate, with the greatest increases occurring in the inner cities. These factors combined with the government policies noted above to produce a landscape in the South Bronx that could be accurately described as similar to that of German cities after Allied bombing at the end of World War II or London after the Blitz. But there had been no war --- this Blitz had been the unwitting result of government policies that had all been justified by what were perceived as high ideals --- aid to the poor, affordable housing and improved education for minority students.

Some of the same factors and government policies contributed to urban decline in other communities around the nation. Central city population losses during the 1970s were the greatest of any decade since World War II, both in terms of real numbers and percentages.

For the South Bronx, the result was a virtual leveling of large tracts of land, with a loss of 40 percent of its housing stock. What emerged was a landscape that has accurately compared to that of bombed out German cities after World War II.

Restoring Markets: During the early 1980s, a reversal began. In the late 1970s, there had been considerable amounts of conventional federal funding. When the Reagan Administration took office, these funding sources were largely eliminated In 1985 Mayor Koch initiated a program that spent $5 billion on affordable housing throughout the city over the next decade, with nearly $1.5 billion being spent in the South Bronx.

A the critical factor was mobilization by community development corporations (community, volunteer and religious groups), such as "Banana Kelly" and Aquinas Homes working with private foundations. These groups set about rebuilding, reclaiming and re-civilizing major portions of the South Bronx with limited amounts of private funding, government funding and volunteer activity. The community development corporations (CDCs) would purchase properties and disused buildings, combine their own funds with limited amounts of city funding and obtain commercial loans to develop the properties. The CDCs thus had a commercial risk. While the amount of public funding was substantial, there were not the traditional large amounts of outright grant money that so counterproductively draw the attention of special interests, groups and operators who emerge as recipients and leave little, if any, trail of accomplishment. This has been a particular problem in cities like New York, with their unfortunate tradition of political corruption. Robert Worth, in "Guess Who Saved the South Bronx?" notes that the Bronx political leadership was unusually honest and focused on the goal of revitalization, in contrast to leadership at the same time in other parts of the city.

The result is that the South Bronx today (2001) has returned as a vibrant community. It is different from the old South Bronx, with considerably lower population densities. Most new buildings are single family houses or two and three story multi-family units. Vacant land has been built upon and disused buildings have been refurbished.

At the same time, the South Bronx does not represent a classic "gentrification," whereby higher income people repopulate an area, driving out the lower income residents. Thus, unlike the master planned urban renewal projects that displaced thousands of inner city residents in previous decades, the South Bronx is an unplanned phenomenon --- the result of market forces with incentives from government and community organizations. Moreover, the emerging situation involves much higher levels of home ownership. The South Bronx is increasingly a community of home owners rather than renters.

The resurrection of the South Bronx represents by far the most significant renewal of a derelict tract of urban land in the United States. That it has occurred in what was the most derelict such tract makes it all the more impressive.

1. Cause: Government Policies: The devastation of the South Bronx can be largely blamed on public policy and urban planning. Despite what might have been the best intentions, government's interference with the housing market in the South Bronx literally destroyed it.

2. Failure: Remote Government Programs and Urban Planning: The traditional top-down urban planning and urban renewal policies were tried in the South Bronx and failed before the 1980s.

3. Success: Government Assisted Market Restoration & Local Effort: Nonetheless, the ultimate revival of the South Bronx also was the result of government policies.. But the policies were radically different from before.

3.1 Public funding was more decentralized and required a match from the private community development corporations, which faced market (commercial) risk.

3.2 There was virtually no role for proscriptive, top-down urban planning or large scale government directed urban development.

3.3 The public funding was local funding. It has long been known that local governments and their taxpayers are far more careful with their own funding than with funding received from more remote governments.

3.4 The South Bronx is becoming a community of home owners, rather than renters. Home owners have a greater incentive to maintain and improve not only their own property but also their communities.

In short, the South Bronx, which had been perhaps the nation's worst victim of top-down urban planning has become a victor over it. Again, to quote Robert Worth:

… neighborhoods are living things that cannot simply be uprooted and replanted from afar.

The failure occurred because government created the conditions that destroyed the housing market, and thus the community. The success occurred because government created the conditions that allowed the market to be restored.